Customer lifetime value or CLV includes the total expected amount a customer will spend on your products or services, from the beginning to the end of the customer relationship. These figures give you a better idea of the loyalty of your current customers. As a result, you can better decide what to invest more in: existing customers or new customers. If your existing customers come back often, it is best to invest less in new customers, and do more for your current customers.
Calculating customer lifetime value
Calculating customer lifetime value is quite simple. You multiply the average value of a purchase by the number of purchases per year and the average number of years a customer relationship lasts. This calculation will help you make more targeted investments.
Improve your score
If your CLV is lower than desired, there are some things you can do to increase it. Here are some examples:
- Make use of a reward system or give exclusive deals to loyal customers who come back often.
- Make sure customers can easily find a product return In case of dissatisfaction.
- Ensure sufficient contact and interaction with customers. This way, customers know they can easily contact you and that you have not forgotten them.
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